System Operations

System Operations

Activities that support and benefit the functions above are grouped into this category. Drafting, technical design services, easement costs, radio and alarm maintenance, standby, tool repair and replacement and insurance are the major items included in this category.

Administration

Supervisor salaries, training, legal and consulting fees and Nelson Hydro's annual rent at the City Works Yard are the major components of this category. Also included in this category are Nelson Hydro's share of City Hall staff in support of billing, computer services and other administrative functions.

Industry Restructuring

Since the early 1990's, particularly in the United States, the electric utility industry has been positioning itself for competition similar to the situation that phone and natural gas have experienced. In the last five years, the British Columbia Utilities Commission has made only minor moves towards customer choice. Wholesale customers such as Nelson Hydro have the ability to choose their electricity supplier, provided that two year's notice is given to the current supplier. There are no near-term plans to offer choice to the rest of the market. In 1997-98, Nelson Hydro and the five other wholesale customers of FortisBC Inc. issued a request for proposals for supply of electricity and other services. Three potential bidders expressed interest, but ultimately declined to submit proposals because they were unable to offer a price lower than the current FortisBC tariff rates. Based on these conditions, Nelson Hydro has entered into negotiations for a new five-year supply contract with FortisBC. FortisBC remains our power supplier under contract.

External Rate Impacts

FortisBC continues to manage capital upgrades to their system which they pass on to their customers in the form of rate increases. These vary each year. For example, in one year, these improvements amounted to a an approximate 5% rate increase over seven years. The rate increase required for Nelson Hydro to pass on to their customers is 28% of 5%, or 1.4% because only 28% of Nelson Hydro's cost of service is due to power purchase. The importance of our ability to generate a significant portion of our energy requirement with Bonnington Falls becomes clear.

Outlook

Simply stated – rates are going up! In Canada, jurisdictions that have been in a position to develop significant hydro-electric resources have been able to keep rates low. Places that have developed thermal or nuclear generation have not been as successful. It is safe to say that there is little or no additional hydro resource left to develop.